Solid demand for air travel continues, says IATA

April 6, 2014 12:03 pm

The International Air Transport Association (IATA) announced global passenger traffic results for February showing demand growth of 5.4% compared to February 2013. Although this represented a slowdown compared to the January traffic increase of 8.2%, cumulative traffic growth for the first two months of 2014 was 6.9%, which compares favorably with the 5.2% overall growth achieved in 2013.

“People are flying. Strong demand is consistent with the pick-up in global economic growth, particularly in advanced economies,” said Tony Tyler, IATA’s Director General and CEO.

International Passenger Markets

February international passenger traffic rose 5.5% compared to the year-ago period. Capacity rose 5.8% and load factor slipped 0.2 percentage points to 76.8%. All regions recorded year-over-year increases in demand.

– European carriers’ international traffic climbed 5.8% in February compared to the year-ago period, the strongest growth among the three largest regions. Capacity rose 5.7% and load factor was stable at 77.4%. Growth in the manufacturing and services sectors has now reached rates not seen since the first half of 2013, according to JPMorgan/Markit’s surveys of purchasing managers, and growth is also occurring in major economies like France.

– Asia Pacific carriers recorded an increase of 4.0% compared to February 2013. While this was down compared to January traffic growth (8.3%), in part this was owing to the timing of the Lunar New Year, which took place in January, a month earlier than in 2013. With capacity up 5.1% over February 2013, load factor slipped 0.8 percentage points to 76.8%. While regional economic activity is robust and trade volumes continue to accelerate, business activity has declined for the third month running in China, according to data from JPMorgan/Markit.

– North American airlines saw demand rise 2.0% in February over a year ago, a slowdown on the January growth rate (3.7%). The demand backdrop in the region is showing signs of improvement, signaling that air travel should continue to expand in coming months. Capacity rose 2.6%, pushing down load factor half a percentage point to 75.9%.

– Middle East carriers had the strongest year-over-year traffic growth in February at 13.4% as airlines continue to benefit from the strength of regional economies and solid growth in business-related premium travel. The Gulf nations in particular are enjoying acceleration in non-oil sectors of their economies, further supporting strong demand for air travel. Capacity rose 12.5% and load factor climbed 0.6 percentage points to 78.9%.

– Latin American airlines’ traffic rose 4.2%, only slightly behind January growth (4.6%) and the outlook is broadly positive with continued robust performance of economies like Colombia, Peru and Chile, and the upcoming demand to be generated by the FIFA World Cup in Brazil. Capacity rose 2.1% and load factor climbed 1.6 percentage points to 79.0%, the highest for any region.

– African airlines experienced the slowest demand growth, up 0.1% compared to February 2013. With capacity up 4.1%, load factor fell 2.6 percentage points to 63.7%, by far the lowest among the regions. The weakness over recent months in part could reflect adverse economic developments in some parts of the continent, with the slowdown in the major economy of South Africa, as well as growing competition from airlines based outside the region.

Domestic Passenger Markets

Domestic markets rose 5.3% in February compared to a year ago. Total domestic capacity was up 4.1% and load factor rose 0.9 percentage points to 80.4%.

Growth was especially strong in the developing economies of Brazil, China and Russia, with all three recording double-digit increases in demand compared to the year-ago period.

– China and Russian domestic air travel rose 12.0% and 10.5% respectively in February. Although there have been indicators of slowdown in the Chinese economy, domestic consumer demand remains solid. Air travel in Russia has been supported by the government’s policy of sustaining employment and incomes.

– India was the only domestic market to see a contraction in demand. Traffic fell 1.8% in February compared to February 2013. Subdued consumer sentiment ahead of the upcoming election, as well as elevated fare levels compared to a year ago, are likely exerting downward pressure on demand.

The Bottom Line

“The strong demand for air travel at a time of rising business and consumer confidence is indicative of the symbiotic relationship between aviation and economic growth. The connectivity provided by aviation both enables and sustains trade and development, while economic activity creates demand for aviation. Governments that treat aviation as if it were a luxury item–or a necessary evil–are depriving their populations of a key engine of growth and job creation,” said Tyler.

Last month, the UK government recognized the principle that its onerous Air Passenger Duty (APD) was hurting the UK’s economic prospects-particularly its ties with emerging economies such as China, India and Brazil. From next April, the highest bands will be eliminated. This followed reductions agreed last year to address the economic damage that APD was doing to Northern Ireland. But despite these adjustments, planned annual inflation-related increases continue.

“This latest effort is half-hearted at best. Instead of immediately addressing the economic damage of this misguided tax, the government will eliminate the highest bands from next year. The APD is a drag on the UK economy that far outweighs even the billions of pounds that it siphons from the pockets of travelers. The government’s tinkering pays little more than lip service to this fact. It’s time for decisive action. Taxing a necessity like connectivity as if it were a social indulgence hurts the economy. A comprehensive review is needed,” said Tyler.

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